| KUALA LUMPUR, June 30
KUALA LUMPUR, June 30 Malaysia has ordered
Australian miner Lynas to comply with an independent
panel's recommendations in order to receive a pre-operating
licence for a rare earths facility.
For a related story:
The $230 million Malaysian plant is part of a plan by Lynas
to process rare earths from its mine in Australia and bridge
gaps in global supply after top producer China slashed its
export quotas last year.
The proposed plan has hit a storm of protests on concerns
that it could endanger the health of nearby residents.
Following are questions and answers on the proposed plant,
and possible implications of any delay in its operation.
WHAT IS DRIVING THE PROTESTS?
Fear of a repeat of a controversial rare earths factory
operated by Mitsubishi Chemical in the northern state
of Perak, which was closed down in the 1990s after critics say
it was linked to birth defects and at least eight leukaemia
The protest against the Lynas plant is driven by local
residents and green groups but is also increasingly being taken
up by the country's opposition, which is hoping to capitalise on
the unhappiness to drum up anti-government sentiment.
HOW POLITICALLY SENSITIVE IS THE LYNAS PROJECT?
Increasingly, as it comes ahead of general elections which
could happen as early as the end of2011. Prime Minister Najib
Razak wants more foreign investment, but is wary of sparking
voter anger after his ruling coalition suffered record losses in
2008 national polls.
Najib earlier this year scrapped a proposed coal-fired power
plant by state power firm Tenaga in Malaysia's Borneo
state of Sabah after mounting protest over the project's
Following the Lynas protest, the government also cancelled a
memorandum of understanding with Hong Kong-listed CVM Minerals
Ltd to conduct a feasibility study to explore and mine
rare earth minerals in Perak.
WILL THE LYNAS PROJECT BE SHELVED?
Widespread anger by residents and green groups could put
pressure on the Malaysian government to move cautiously on this
project. Some analysts think the authorities could delay a
decision until after the next general election.
Najib's ruling coalition generally looks likely to retain
power but a failure to reverse its 2008 polls losses would
increase pressure on him to double efforts to shore up voter
support, which could put the Lynas project in jeopardy.
WHAT WILL HAPPEN TO GLOBAL SUPPLY SCENARIO AND PRICES?
With the Malaysian government holding off approval for the
processing plant, Lynas might have to stockpile the rare earths
or look elsewhere to set up the facility. Either way, there will
be a delay.
This could lift the supply deficit in the global market
beyond a peak of 18,734 tonnes that Goldman Sachs has estimated
for this year and delay a surplus scenario expected in 2013.
The concerns in Malaysia could further boost prices of rare
earths that have risen due to top producer China cutting export
quotas and strong demand for these commodities used in products
ranging from cell phones to hybrid cars.
The price of cerium oxide -- the most abundant rare earth
that is used in batteries and petroleum additives -- has more
than doubled to $135 a kilo on May 9 from $52.62 in the last
quarter of 2010, Lynas data show.
CAN CONSUMERS CAN RELY ON OTHER RARE EARTHS PRODUCERS?
Consumers may turn to U.S.-based Molycorp . The firm
is modernising a rare earth mine and processing facilities at
Mountain Pass in California, which was acquired in 2008 from
Chevron Corporation .
Analysts say new mine production from Mountain Pass will
start in 2012 although small-scale production from stockpiled
rare earths has already resumed. Molycorp will produce 3,000
tonnes this year and that will quadruple next year.
(Editing by Liau Y-Sing)